Commercial News » New York City Edition | By Michael Gerrity | October 18, 2022 8:49 AM ET
According to CBRE's Q3 2022 office data for Manhattan's Midtown, Downtown and Midtown South markets, despite growing U.S. economic slowdown concerns, Manhattan's office leasing activity is rebounding to pre-pandemic levels.
During the third quarter, office leasing totaled 7.17 million sq. ft., an increase of 21% from the prior quarter and 16% ahead of the five-year quarterly average. As a result of the robust Q3, year-to-date leasing reached 18.79 million sq. ft. in Manhattan, up 54% from the same time last year. Further, the availability rate dropped by 40 basis points (bps) during the quarter to end Q3 at 18.8%.
"Several large transactions drove the market in Q3, which also saw more examples of the flight-to-quality trend that has been picking up steam throughout 2022," said Mike Slattery, CBRE's Associate Research Director. "The positive absorption in Q3 reduced supply of both direct and sublease space, which was a welcome sign, but available space remains elevated amid gathering economic headwinds."
The Midtown market finished Q3 2022 with 4.62 million sq. ft. of leasing activity, 9% higher than Q2 and 21% above the five-year quarterly average. Year-to-date, Midtown saw 12.24 million sq. ft. in total leasing, a massive 67% increase from the same time last year. As a result, net absorption was a positive 1.76 million sq. ft., while the market's availability rate dipped by 70 bps quarter-over-quarter to 17.4% -- 30 bps lower than a year ago and an indicator of a market in recovery. CBRE also reported the average asking rent of $83.39 per sq. ft. during Q3 was up 2% from the same time in 2021.
Midtown South also experienced robust leasing in Q3. Quarterly leasing activity of 1.70 million sq. ft. was up 54% from the previous quarter and 32% from the five-year quarterly average. Like Midtown, Midtown South's year-to-date leasing of 4.21 million sq. ft. rose 36% from last year. Reflecting recovering occupier confidence, Midtown South's average asking rent edged up 4% year-over-year and 1% over the previous quarter to $82.49. Despite many positives, Midtown South saw negative net absorption of 236,000 sq. ft. during the third quarter, continuing a trend that has year-to-date net absorption reach negative 968,000 sq. ft. this year. The availability rate increased 30 basis points (bps) from the previous quarter to 19.2% and was up 40 bps from a year earlier.
The Downtown market was a mixed bag. Q3 leasing activity totaled 851,000 sq. ft., which was 41% higher than the previous quarter, but down 20% from the five-year quarterly average. While net absorption during Q3 was positive 96,000 sq. ft., the year-to-date total was negative 77,000 sq. ft. Also, although the availability rate fell 10 bps from last quarter to 22.5%, it is up 160 bps from a year ago and remains the highest among Manhattan's three office markets. Downtown's average asking rent of $57.69 per sq. ft. was down 1% both quarter-over-quarter and year-over-year.